WEEKLY BRIEF | Record Highs, Missing Statements

Hello, and welcome to the IVA Weekly Brief for Wednesday, October 7.

There are no changes recommended for any of our Portfolios.

The S&P 500 index notched its 28th record high of the year yesterday. 500 Index (VFIAX) is now up 15.2% for the year (counting dividends). Yet if the year ended today, that would be the fund's third-worst calendar-year return since 2017.

The only two weaker years were 2018, when 500 Index slid 4%, and 2022, when it dropped 18% as inflation surged. Every other year brought gains, and big ones. In five of the last 10 years, the fund returned 20% or more.

Since the end of 2016, 500 Index has compounded at a 15.5% annual rate. That's well above its 11.7% annual return since its 1976 inception, and a pace that’s unlikely to last.

That doesn't mean you should bail out of U.S. stocks. It means keeping your expectations in check and making sure your portfolio is diversified. Markets are cyclical, and giant U.S. stocks won't always lead the way.

Yet Another Vanguard SNAFU

This week, several IVA readers emailed me about the same problem. Their September 30 statements showed the correct ending account value, but a zero balance as of June 30.

When I checked my own account on Monday morning, I couldn't confirm it. My most recent statements were from August 31, even though Vanguard had emailed me Sunday saying my statements were ready. One reader who reported the zero balance told me his September statements had since disappeared from Vanguard.com.

When I asked Vanguard, I was told: "We are aware of this discrepancy and impacted clients will receive a corrected statement."

"Discrepancy" is putting it lightly. Two IVA readers who spoke with Vanguard representatives were each told, independently, that 23% of statements were affected. I’ve asked Vanguard to confirm and will update you.

Nearly one in four. How does that get past quality control?

The cleanup hasn't been smooth either. Vanguard appears to have pulled the September statements first and explained later. Monday, Vanguard posted that statements were "temporarily unavailable." By Tuesday, the notice said "certain" statements.

Tuesday night, all my statements were available, but the "certain statements" alert was still up. Then Vanguard sent an all-clear email, and as of Wednesday morning, everything looks to be in working order again (at least on my end).

To be clear, no one lost money. If your statement was wrong (or temporarily unavailable), download the corrected version for your records.

Still, this is the latest in a string of service stumbles. CEO Salim Ramji has said the right things about fixing Vanguard's technology and service, and a new website is rolling out. But getting a quarterly statement right is basic plumbing, and Vanguard’s plumbing still leaks.

Rising Cash Yields

Three weeks after the Fed raised short-term rates in mid-September, Vanguard’s money market funds are still the highest-yielding cash options.

Take Federal Money Market (VMFXX). Its yield has climbed from 3.71% before the hike to 3.80%. That's a smaller increase than Vanguard's bank sweep programs saw, but it still out-yields both:

• Cash Plus Account's yield rose 15 basis points (0.15 percentage points), from 3.35% to 3.50%, on October 1. But that 3.35% included a 25-basis-point "boost." Exclude the boost, and the base rate rose 40 basis points.
• Cash Deposit's yield rose 25 basis points, to 2.00%.

The wrinkle: I expected Vanguard to roll out Cash Plus's tiered rates last week, with higher yields for those with over $1 million at Vanguard. The Q&A page still says "coming soon!"

Once tiers arrive, Flagship investors (those with $1 million or more at Vanguard) could earn more in Cash Plus than in the money market fund. Time will tell.

Manager Exit at Global Positive Impact

Lee Qian, one of the founders of Baillie Gifford's Positive Change strategy, has stepped down as co-manager of Baillie Gifford Global Positive Impact Stock (VBPIX). Kate Fox, his co-founder, is now the fund's sole named manager.

With less than $300 million in assets, the fund isn't widely held. If you own it, though, I wouldn't sell over this. Fox has run the fund alongside Qian since its 2017 launch. Still, losing a founder is worth watching.

Our Portfolios

Our Portfolios are showing solid returns for the year through Tuesday. The Aggressive Portfolio is up 14.8%, the Aggressive ETF Portfolio is up 13.2%, the Growth Portfolio is up 13.7%, the Moderate Portfolio is up 12.4% and the Conservative Portfolio is up 7.3%.

This compares to a 15.1% gain for the Total Stock Market Index (VTSAX), a 14.6% return for the Total International Stock Index (VTIAX), and a 2.6% decline for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 13.3% for the year, and its most conservative, LifeStrategy 20/80 (VASIX), is up 1.3%.

IVA Research

Yesterday, Premium Members received my exclusive interview with Dividend Growth (VDIGX) portfolio managers Tom Levering and Tim Casaletto.

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.